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Surrogate Advertisements in India - Progress or Overkill?

Surrogate Advertisements in India - Progress or Overkill?
Trade & Regulatory Compliance Practice | Suvarna Mandal and Rishikaa

Advertisements form an important part of marketing strategies of businesses as they play a key role in influencing consumers’ buying behaviour. Advertisers use several approaches for marketing their products or service to the consumers to convince them to purchase the advertised product/service. However, advertising law in India prohibits/regulates advertisement of certain products that are injurious to health, such as cigarettes, alcohol, tobacco, and similar products. To circumvent this prohibition, advertisers employ brand recall through ‘brand extensions’ by making surrogate advertisements for such substances that are prohibited/regulated.

Indirect or surrogate advertisements pertain to the subtle promotion of goods and/or services (such as tobacco, cigarettes, alcohol etc.) that are prohibited from being advertised under law, by instead marketing them indirectly through products or services that can be lawfully advertised, such as water, soda, perfumes, music CDs, etc.

There has been a lot of discussion around whether there should be a complete ban on surrogate advertisements or whether they should be allowed under genuine ‘brand extensions’. This discussion was brought to the forefront recently, when the Central Consumer Protection Authority (“CCPA”) under the Department of Consumer Affairs notified the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 (“2022 Misleading Advertisement Guidelines”), sparking concerns on the status of surrogate advertisements in India.

The 2022 Misleading Advertisement Guidelines, which broadly apply to all “form, format, and medium of advertisement”, define a "surrogate advertisement” as below –

  • “surrogate advertisement” means an advertisement for goods, product or service, whose advertising is otherwise prohibited or restricted by law, by circumventing such prohibition or restriction and portraying it to be an advertisement for other goods, product or service, the advertising of which is not prohibited or restricted by law.

The 2022 Misleading Advertisement Guidelines broadly prohibit surrogate advertisement for goods/services whose advertising is otherwise prohibited/restricted by law, by circumventing such prohibition or restriction and by portraying it to be an advertisement of goods or services whose advertisement is not prohibited/restricted under law. Further, as per these guidelines, an advertisement would be considered as surrogate/indirect if the advertisement does the following:

  • Directly/indirectly indicates or suggests that it is for prohibited/restricted goods, or
  • Uses brand name, logo, colour, layout, and presentation associated with prohibited/restricted goods.

A proviso to this particular provision states that mere use of a “brand name or company name” of the prohibited/restricted goods or service will not be considered surrogate advertisement if the advertisement is “not otherwise objectionable as per the provisions set out in these guidelines”. However, the 2022 Misleading Advertisement Guidelines fail to provide any clarity as to what would amount to “mere use” of a brand name.

In addition to the 2022 Misleading Advertisement Guidelines, statutes such as the Cable Television Networks (Regulation) Act, 1995, the Cigarette and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 etc., also prohibit indirect advertisement of identified goods, products or services that are harmful. However, they do allow advertisements relating to genuine brand extensions subject to fulfilment of specific conditions.

For instance, the ‘Advertisement Code’ as incorporated into the Cable Television Network Rules, 1994 (“CTN Rules”), prohibits surrogate/indirect advertisements on cable services, however, includes provisions that stipulate specific conditions for allowing such advertisements that are genuine brand extensions. Additionally, the self-regulation based Code of the Advertising Standards Council of India (“ASCI Code”) is generally accepted and largely followed by relevant industry members such as advertisers, advertising agencies, media, etc. The Advertising Standards Council of India (“ASCI”) has provided specific guidelines for qualification of brand extensions relating to indirect advertisements.

In March 2021, the Central Board of Film Certification (“CBFC”) issued a clarification on the criteria for qualification of advertisements relating to a ‘Brand Extension Product’ based on the combined reading of the Advertisement Code and the ASCI guidelines on brand extensions. As per the clarification, advertisers are required to follow certain steps before making advertisements for brand extensions meant for cable services. The steps include, registration of the brand extension product with the appropriate government authority, filing an application with the Ministry of Information and Broadcasting (“MIB”), along with the copy of the proposed advertisement after obtaining a certificate from a registered Chartered Accountant (“CA”) that the product carrying the same name as the prohibited products is distributed in reasonable quantity and is available in a substantial number of outlets where other products of the same category are available, and the proposed expenditure on such advertising is not disproportionate to the actual sales turnover of the product. All advertisements found to be genuine brand extensions by the MIB would then be previewed and certified by the CBFC to ensure compliance with the CTN Rules.

Clearly, through this clarification, an objective criterion has been prescribed for allowing brand extensions on cable services. On the contrary, the 2022 Misleading Advertisement Guidelines appear to be placing a blanket ban on all forms of surrogate advertisements, including genuine brand extensions.

Our Take

The 2022 Misleading Advertisement Guidelines, are platform agnostic, i.e., they apply to advertisements across all platforms.

However, the guideline specifically pertaining to surrogate advertisement in the 2022 Misleading Advertisement Guidelines is ambiguous since it appears to not permit genuine ‘brand extensions’ of brands, logos, trademarks etc., associated with products whose advertisement is prohibited, which otherwise is allowed (subject to meeting specific conditions) under other regulations such as the CTN Rules and ASCI Code.

The proviso to the guideline on surrogate advertisements in the 2022 Misleading Advertisement Guidelines appears to suggest that the Central Consumer Protection Authority (“CCPA”) has assumed discretion to decide whether a particular instance of extension of a brand, which is usually associated with a prohibited product, is objectionable under the 2022 Misleading Advertisement Guidelines.

Accordingly, the CCPA may object to a thinly veiled advertisement of a liquor brand which is being promoted through an advertisement for products like mineral water (which is originally associated with consumption of alcohol), where the content of the advertisement, either indirectly or through inuendo suggests an association of the product under “brand extension” with the prohibited product. Another example of advertisement for which the CCPA can raise an objection would be one which uses a brand/logo of tobacco based products in relation to a mouth freshener.

The recent warning issued by the Department of Consumer Affairs (“DCA”), on 1st September 2022, to industry bodies asking them to ensure strict compliance of the provisions pertaining to surrogate advertisements in the 2022 Misleading Advertisement Guidelines corroborates this understanding. As per news reports, this warning was issued after the DCA observed that during globally televised sporting events such as the Asia Cup 2022, alcoholic beverages were being advertised under the garb of music CDs, club soda, and packaged drinking water and tobacco products were being promoted through advertisements for fennel and cardamom. Accordingly, the broad wording of the 2022 Misleading Advertisement Guidelines may lead to extension of powers and overreach by the CCPA.

Further, the 2022 Misleading Advertisement Guidelines are in addition to other laws and regulations, such as the CTN Rules and the ASCI Code. This potentially allows application of the 2022 Misleading Advertisement Guidelines to advertisements that otherwise would only have been governed by such regulations and laws. This overlap is likely to add to the confusion because it would allow a television advertisement, for example, to be placed under the teeth of the 2022 Misleading Advertisement Guidelines despite receiving certification and passing the muster under the CTN Rules.

Generally, genuine brand extensions are acceptable across the world as they are based on legitimate products or businesses. Brand extensions that are invested in products that are permitted under law provide an opportunity for businesses to diversify and expand into newer markets. A good example of brand extension and business expansion would be the brand ‘ITC’, a tobacco giant, which also diversified its presence in lifestyle, FMCG and hotel businesses under the same brand.

The ambiguity, overlap and the confusion stemming from the 2022 Misleading Advertisement Guidelines leaves the guidelines open to legal challenge.

In light of the above, laying down an objective criterion and providing guidance on the treatment of brand extensions under the 2022 Misleading Advertisement Guidelines is the need of the hour for reducing the burden of courts and providing a conducive environment for ease of doing business.

Links:
Link to the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 - https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/CCPA%20Notification.pdf

Link to our blog on the 2022 Misleading Advertisement Guidelines - https://www.saikrishnaassociates.com/guidelines-for-prevention-of-misleading-advertisements-and-endorsements-for-misleading-advertisements-2022.php

Practice Contacts

Ameet Datta - Partner (Practice Lead) | ameet@saikrishnaassociates.com

Suvarna Mandal - Partner | suvarna@saikrishnaassociates.com

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